Correlation Between Smart REIT and Phillips Edison

Can any of the company-specific risk be diversified away by investing in both Smart REIT and Phillips Edison at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Smart REIT and Phillips Edison into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Smart REIT and Phillips Edison Co, you can compare the effects of market volatilities on Smart REIT and Phillips Edison and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Smart REIT with a short position of Phillips Edison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smart REIT and Phillips Edison.

Diversification Opportunities for Smart REIT and Phillips Edison

-0.3

Correlation Coefficient

Smart REIT  Phillips Edison

Very good diversification

The 3 months correlation between Smart and Phillips is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Smart REIT and Phillips Edison Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips Edison and Smart REIT is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Smart REIT are associated (or correlated) with Phillips Edison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phillips Edison has no effect on the direction of Smart REIT i.e., Smart REIT and Phillips Edison go up and down completely randomly.

Pair Corralation between Smart REIT and Phillips Edison

Assuming the 90 days horizon Smart REIT is expected to under-perform the Phillips Edison. In addition to that, Smart REIT is 3.39 times more volatile than Phillips Edison Co. It trades about -0.04 of its total potential returns per unit of risk. Phillips Edison Co is currently generating about 0.02 per unit of volatility. If you would invest  3,862  in Phillips Edison Co on September 13, 2024 and sell it today you would earn a total of  40.00  from holding Phillips Edison Co or generate 1.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Smart REIT  vs.  Phillips Edison Co

Smart REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smart REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Phillips Edison

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Phillips Edison Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Phillips Edison is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Smart REIT and Phillips Edison

The main advantage of trading using opposite Smart REIT and Phillips Edison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smart REIT position performs unexpectedly, Phillips Edison can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Phillips Edison will offset losses from the drop in Phillips Edison's long position.

The idea behind Smart REIT and Phillips Edison Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.